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Federal Court of Australia |
Last Updated: 15 February 1999
Rick Damelian Pty Ltd v Daewoo Automotive Australia Pty Ltd
Trade Practices Act 1974 (Cth)
Fair Trading Act 1987 (NSW)
RICK DAMELIAN PTY LIMITED v DAEWOO AUTOMOTIVE AUSTRALIA PTY LIMITED & ANOR
NG 515 of 1997
BRANSON J
12 FEBRUARY 1999
SYDNEY IN THE FEDERAL COURT OF AUSTRALIA BETWEEN: (ACN: 002-685-510)
Applicant AND: First Respondent
RICHARD KENNETH HULL
Second Respondent JUDGE:
NEW SOUTH WALES DISTRICT REGISTRY NG 515 OF 1997
RICK DAMELIAN PTY LIMITED
DAEWOO AUTOMOTIVE AUSTRALIA PTY LIMITED (ACN: 063-424-537)
BRANSON J DATE OF ORDER: 12 FEBRUARY 1999 WHERE MADE: SYDNEY
THE COURT ORDERS THAT:
1. The application be dismissed.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
|
IN THE FEDERAL COURT OF AUSTRALIA | |
| NEW SOUTH WALES DISTRICT REGISTRY | NG 515 OF 1997 |
|
BETWEEN: | RICK DAMELIAN PTY LIMITED
(ACN: 002-685-510) Applicant |
|
AND: | DAEWOO AUTOMOTIVE AUSTRALIA PTY LIMITED (ACN: 063-424-537)
First Respondent
RICHARD KENNETH HULL Second Respondent |
JUDGE:
BRANSON J DATE: 12 FEBRUARY 1999 PLACE: SYDNEY
1 This is a proceeding in which the applicant, a major dealer in cars and car accessories and services in Sydney, claims relief for damage allegedly suffered by reason of alleged misleading and deceptive conduct engaged in by the respondents, or one of them. The first respondent ("DAA") is in the business of supplying Daewoo cars, car accessories and services through a network of dealerships. The second respondent was at all material times the managing director of DAA. The principal allegation made by the applicant against the respondents is that they, or one of them, falsely represented to the applicant that a termination clause included in the dealership agreement entered into between DAA and the applicant would not be exercised against the applicant.
2 The hearing was restricted to the issue of liability with assessment of damage, if any, to await determination of the issue of liability.
FINDINGS OF PRIMARY FACT
Introduction
3 The events about which evidence was given at the hearing occurred mainly in early and mid 1994. Surprisingly limited contemporaneous records of such events appear to be available. Not surprisingly, some witnesses had more detailed recollections than others, and memories differed as to the details of what occurred at certain meetings. There were, however, some significant discrepancies in the evidence which went well beyond matters of detail. In some cases I formed the view that these discrepancies were the result of differences in recollection, perhaps accompanied by unwillingness to accept the possibility of error. In a limited number of instances I formed the view that a witness was not being frank with the Court. The instances in which I formed such a view are identified below.
The Meetings
4 In early 1994 publicity was given within the car industry in Australia to the fact that Daewoo cars were to be introduced into the Australian market. Ricardo Rovira Damelian ("Mr Damelian"), the Managing Director of the applicant, telephoned the second respondent ("Mr Hull") and a meeting between them was arranged at which the possibility of the applicant obtaining a franchise to distribute Daewoo cars was to be discussed.
5 On 22 April 1994 a meeting took place at the applicant's Petersham premises at which Mr Damelian, Mr Hull and David Stone ("Mr Stone"), General Manager Dealer Development for DAA, were present. Mr Stone gave evidence that Heung Sup Han ("Mr Han"), then a Deputy Managing Director of DAA, was present at this meeting. I find that Mr Stone is mistaken in this regard. Two sites on Parramatta Road controlled by the applicant were inspected on 22 April 1994.
6 Mr Stone had commenced employment with DAA only four days before the meeting of 22 April 1994. I accept his evidence that his work concerning the details of dealership requirements, dealer sales territories and sales planning volumes had not yet commenced. It does not appear, however, that Mr Damelian was aware on 22 April 1994 that DAA's planning for its dealer network was at only an embryonic stage. Mr Damelian's evidence is that on that day agreement was reached that the site at 563 Parramatta Road was the preferable site for a Daewoo dealership. He also gave evidence that he asked Mr Hull and Mr Stone what amount of capital was required for the Daewoo dealership and was told: "About half a million dollars for motor vehicles and about thirty thousand dollars for Daewoo parts, tooling, accessories and fittings prior to commencement". He said that he responded: "I intend to carry no less than half a million dollars in inventory and I expect to also carry about half a million dollars of used cars on the site".
7 I find that no agreement was reached on 22 April 1994 concerning the use of the site at 563 Parramatta Road as a Daewoo dealership. It may well be, however, that Mr Damelian suggested to the DAA executives that, of the two sites inspected that day, 563 Parramatta Road was the preferable site for a Daewoo dealership and that neither of them demurred. It may also be the case that Mr Damelian spoke that day in expansive terms of the investment that the applicant would be prepared to make in a Daewoo dealership. I accept the evidence of Mr Hull and Mr Stone that there was no discussion on 22 April 1994 of the terms of any prospective dealer agreement.
8 On 13 May 1994 a meeting took place at the Chullora premises of DAA. It is not in dispute that Messrs Damelian, Hull and Stone were present at this meeting and that during the course of the meeting Mr Damelian was introduced to Mr Han but that Mr Han was not present throughout the meeting. It is also not in dispute that Keith Norman Wall ("Mr Wall"), General Manager Sales and Marketing of DAA, was present for a short time at the beginning of the meeting. Mr Michael De Vriendt, another Deputy Managing Director of DAA, may also have been present for a short time.
9 Mr Damelian gave evidence that the meeting of 13 May 1994 was the only meeting which he attended at DAA's Chullora premises before he signed a dealership agreement on behalf of the applicant with DAA. Messrs Hull, Han, Stone and Wall gave evidence of two meetings at Chullora with Mr Damelian: one in May and one in June 1994. Mr Hull's diary for 1994 has the name "Rick Damelian" written under the heading 23 June on the line appropriate for 9.00am. Mr Stone's diary for 1994 has an entry "9 am Rick D" in the space allocated to 23 June. I am satisfied that Mr Damelian did attend two meetings with DAA executives at Chullora, one on 13 May 1994 and one on 23 June 1994. I have not formed the view that Mr Damelian deliberately sought to mislead me as to the number of meetings held at Chullora. I think it more likely that the passage of time has resulted in his memory "collapsing" the two meetings into one.
10 Ronald Frederick Brien ("Mr Brien"), a former employee of the applicant, gave evidence, which I accept, that he accompanied Mr Damelian to one meeting at Chullora but he was uncertain as to the date of the meeting. There was very limited challenge to Mr Brien's evidence of what happened at the meeting that he attended. His evidence in this regard is thus important. To determine which meeting he attended, it is necessary to compare his evidence concerning the meeting that he attended with the other evidence available concerning what happened at each of the two Chullora meetings.
11 Mr Damelian said that the meeting of 13 May 1994 started between 9.00 and 10.00 am and lasted between two and three hours. He said that initially he was met by Mr Stone and then Mr Hull and that he was invited to meet a number of other DAA executives. Subsequently the meeting took place in a boardroom where the DAA executives gave a presentation as to what DAA would be doing in Australia. Thereafter, on Mr Damelian's evidence, details of the Daewoo franchise were discussed including inventory and investment requirements, expectations as to premises, showroom, used car marketing, spare parts, servicing and training. Also discussed, on Mr Damelian's evidence, were the brand positioning of Daewoo in the marketplace, the product range and pricing, the number of dealers to be appointed in the Sydney metropolitan area and the terms and conditions of the dealer agreement. However, in assessing Mr Damelian's evidence concerning the meeting of 13 May 1994 I bear in mind that he is mistakenly of the view that he only attended one meeting at Chullora when in fact he attended two such meetings.
12 Mr Hull gave evidence that the meeting of 13 May 1994 started at 2.00 pm and lasted about one hour. He said that the topics discussed at the meeting were the structure of the joint venture between Daewoo Corporation of Korea and a company called Starsurya of Indonesia which had given rise to the incorporation in Australia of DAA, Mr Damelian's proposal to use the site at 563 Parramatta Road for the display of new and used cars but with a showroom for Daewoo as part of another site, DAA's standard signage program, DAA's five year market representation plan, car models and pricing, dealer margins and parts and servicing requirements.
13 Mr Stone also said that the meeting of 13 May 1994 started at 2.00 pm and lasted about an hour. He said that although Mr Hull chaired the meeting and started it off, the meeting was principally his (ie Mr Stone's). I understand this to mean that the meeting was principally concerned with issues that fell within Mr Stone's area of responsibility within DAA. Mr Stone identified the three principal topics for the meeting as Mr Damelian's plans in terms of representation for Daewoo, DAA's market representation plan in the Sydney area and DAA's broad requirements in terms of building facilities for a Daewoo dealership.
14 Mr Hull's evidence was that the meeting of 23 June 1994 started at 9.00 am and lasted an hour to an hour and a half, and that the purpose of the meeting was to let Mr Damelian know that he was DAA's preferred candidate for the inner west prime market area ("PMA"). He said that at the meeting Mr Stone "went through all the details of the appointment" which covered "premises, signage, vehicles, stock, floor plan, demonstrator policies, parts and service issues, participation in a dealer advertising co-operative, the dealer agreement." Mr Hull's evidence was that at the close of the meeting he went downstairs with Messrs Damelian and Han and inspected Mr Han's "drive car".
15 Mr Stone also gave evidence that the meeting of 23 June 1994 started at 9.00 am. He estimated that it lasted "an hour, maybe a little bit longer." Mr Stone's evidence as to the topics discussed at the meeting is similar to that of Mr Hull. Mr Stone said that it was at this meeting that he handed to Mr Damelian a dealer application form and advised him that he needed to complete it and return it to DAA and that after each department of DAA had signed off on the appointment, a letter of appointment, which he would be required to sign, would issue. Messrs Han and Wall did not give any detailed evidence concerning the meeting of 23 June 1994.
16 Mr Damelian gave evidence that Mr Brien accompanied him to the meeting of 13 May 1994 and was present throughout the meeting. Each of Messrs Hull and Stone gave evidence that they did not recall Mr Brien being present at the meeting of 13 May 1994 or the meeting of 23 June 1994. Mr Wall's evidence was that he thought Mr Damelian attended both of the meetings alone. Mr Han gave affidavit evidence only; he did not include Mr Brien in his list of the persons present at the two meetings.
17 Mr Brien gave evidence that he believes that the meeting at Chullora which he attended took place in May 1994 but he agreed that it could have been in June 1994. He believes that the meeting occurred mid to late morning and lasted one and a half to two hours. He said that he recalls Messrs Damelian, Hull and Stone being present at the meeting although he thinks that he met Mr Han before entering the meeting room. Mr Brien said that at the conclusion of the meeting that he attended he went downstairs and looked at a Daewoo "Cielo". The topics which Mr Brien recalls being discussed at the meeting which he attended were Daewoo's stock availability, plans concerning the Australian market, the PMA for which the applicant would be responsible, initial holding of spare parts, tooling for service, initial numbers of stock to be held, floor plan requirements, funding and advertising and the termination provision of the dealer agreement.
18 I find that the meeting of 13 May 1994 was an afternoon meeting which lasted about one hour. I am satisfied that it was held at a time before DAA formally determined that the applicant was its preferred candidate for the inner west PMA and that for this reason the discussions which took place at the May meeting were less detailed than those that occurred at the June meeting. The meeting of 23 June 1994 I find commenced at 9.00 am and probably lasted about one and a half hours. I am satisfied that at this meeting Mr Damelian was told that the applicant was DAA's preferred candidate for the inner west PMA and that the detailed requirements of the dealership were discussed.
19 In the light of the above findings I conclude that Mr Brien accompanied Mr Damelian to the meeting of 23 June 1994 and was not present at the meeting of 13 May 1994.
20 I accept the evidence of Mr Stone that there was no discussion at the meeting of 13 May 1994 concerning the terms and conditions of a dealership agreement. Mr Hull did not recall any such discussion at the meeting of 13 May 1994 and Mr Brien's recollection of discussion on this topic, the general accuracy of which I accept, is consistent with a first time discussion of the topic rather than with a return to a topic earlier discussed.
The Termination Clause
21 Mr Damelian's evidence was that the topic of the termination clause to be included in the dealer agreement was discussed at the meeting of 13 May 1994. I am satisfied that he is mistaken in this regard having "collapsed" the meetings of 13 May and 23 June 1994 in his memory into one meeting. As to what was said on the topic of termination, Mr Damelian's evidence was that Mr Hull said words to the effect "that the termination clauses will be there like in all contracts but based on breaches of convenant". Mr Damelian asserted under cross examination that he made notes of the alleged commitment that Mr Hull made to him on 13 May 1994 although he was unable to produce such notes. I am satisfied that in giving this evidence Mr Damelian was deliberately untruthful and attempting to strengthen the applicant's case.
22 Mr Brien's evidence was that at the meeting that he attended Mr Damelian asked if a dealership agreement was available, and on being told that it was not as it was still in the hands of the legal advisors, asked what the termination situation would be. Mr Brien gave evidence that Mr Hull said: "Why are you asking about termination?" and that Mr Damelian responded: "I was involved with litigation with BMW, I've been very conscious of termination clauses since then and I need to know what's involved." Mr Brien gave evidence of Mr Hull responding to the effect that "because of the strength of the dealer network they believed they'd be signing up, that it was not their intention to cancel any dealer unless there was valid reason in respect to [sic] bankruptcy or dishonesty or something like that", and Mr Damelian saying immediately thereafter "that he was concerned that he didn't know exactly what it'd be and he would like to define that at a point in time very quickly."
23 Mr Hull gave evidence that the topic of the dealer agreement was discussed at the 23 June 1994 although he did not give any details of such discussion. He denied that Mr Damelian mentioned a bad experience with BMW and he further denied that he told Mr Damelian "that there could be examples of termination involving such things as receivership or bankruptcy or criminal offences on the part of the dealer".
24 Mr Stone gave the following evidence as to what he said to Mr Damelian at the meeting of 23 June 1994 concerning the termination provision to be included in the dealer agreement:
"... I said that he would need to execute a dealer agreement, a copy for his execution would be prepared for him at about the time of his commencement. I then added what the broad requirements of the dealer agreement were and elements of it, what it contained .... I said that in aspects of termination that he could relinquish the Daewoo brand on 90 days' notice and that we could terminate him on 180 days' notice. However, I drew to his attention that more importantly, fundamental breaches if not remedied would result in termination on 28 day's notice.
The precision of Mr Stone's evidence in this regard sits uncomfortably with Mr Brien's evidence concerning the discussion between Mr Hull and Mr Damelian on the topic of termination.
25 I find that Mr Damelian raised the topic of the termination clause to be included in the dealer agreement at the meeting of 23 June 1994. I do not accept the accuracy of Mr Damelian's recollection of Mr Hull's response to his question, finding Mr Brien's version of what was said on this topic, which is set out above, more credible. I accept the accuracy of Mr Brien's evidence of what was said by Messrs Damelian and Hull on the topic of termination but I am satisfied that his recollection is incomplete. I am satisfied that by 23 June 1994 Messrs Hull and Stone knew that the dealer agreement which DAA would offer to proposed dealers would provide for termination without cause on reasonable notice. They had no reason on 23 June 1994 to suggest otherwise to Mr Damelian. I do not consider that Messrs Hull and Stone were, on 23 June 1994, or at any time, so anxious to secure the applicant as a Daewoo dealer that would have been prepared deliberately to mislead Mr Damelian as to the terms of the dealer agreement. I find on the balance of probabilities that either Mr Hull or Mr Stone told Mr Damelian during the meeting of 23 June 1994 that the dealer agreement would provide for termination on notice without cause, but that precise details of the termination clause to be included in the dealer agreement may not have been given. To the extent that Messrs Hull and Stone gave evidence contrary to these findings, I am satisfied that their recollections are in error.
26 I also find that during the meeting of 23 June 1994 Mr Stone handed to Mr Damelian a Daewoo Application form for him to complete on behalf of the applicant. I am satisfied that Mr Damelian's recollection that the application was delivered to his office is in error.
27 The applicant forwarded a Daewoo Dealer Application dated 30 June 1994 to DAA. It was received by Mr Stone on that day. Mr Stone circulated the application to all DAA department heads and resident directors. All of those to whom the application was circulated gave their approval to the application by 14 July 1994.
28 On 19 July 1994 Mr Stone wrote to Mr Damelian confirming the appointment of the applicant as the Daewoo dealer for the Sydney Inner West PMA effective from 4 August 1994 subject to the applicant agreeing to and meeting certain conditions. Such conditions included -
"that you execute and return a Daewoo Dealer Agreement within 14 days of receipt, an Agreement is being prepared and will be despatched to you shortly".
and that the applicant meet to DAA's satisfaction "all facility pre-requisites and corporate identification requirements ..." for the site at 563 Parramatta Road. The letter of 19 July 1994 provided for Mr Damelian to indicate by his signature his acceptance of the terms and conditions set out in the letter.
29 On 26 July 1994, Mr Damelian sent by facsimile transmission a letter dated 26 July 1994 to Mr Stone. Sent with the letter was a copy of the letter of 19 July 1994 signed by Mr Damelian to indicate his acceptance. The copy sent to Mr Stone by facsimile transmission bears no date below Mr Damelian's signature. A posted copy of the same letter, with an enclosed copy of the letter of 19 July 1994 signed by Mr Damelian, was received by Mr Stone on 28 July 1994. This copy of the letter of 19 July 1994 bears the date 26 July 1994 below Mr Damelian's signature. By the letter of 26 July 1994 Mr Damelian, on behalf of the applicant, accepted the conditions set out in the letter of 19 July 1994 subject to two minor points of clarification which are of no present relevance.
30 On 28 July 1994 Mr Stone established an account for the applicant with DAA and on or about 15 August 1994 the applicant commenced to place orders with DAA for cars, spare parts, tools and accessories. On 25 August 1994 the applicant commenced operations as a Daewoo dealer.
31 I reject the evidence of Mr Damelian that a day or so before 4 August 1994 Mr Stone told him that DAA did not have his signed acceptance, and that he [Mr Damelian] on 4 August 1994 gave a copy of the letter of 19 July 1994, which he signed and dated 4 August 1994 to indicate his acceptance, to Mr Stone at a dealer launch held on that day. I accept Mr Stone's evidence that by 4 August 1994 he had already set up an account for the applicant and required no further documentation from the applicant at that time. The applicant placed in evidence a copy of the letter of 19 July 1994 which bears Mr Damelian's signature and, below this signature, the date 4 August 1994. I am unable to make a positive finding as to when the date 4 August 1994 was placed on this copy of the letter of 19 July 1994. I am satisfied, however, that it was not done on 4 August 1994 but at some more recent date. I think it likely that Mr Damelian was not frank in his evidence to the Court concerning this copy letter.
32 On 9 August 1994 Mr Brien showed Mr Stone an alternative site for the applicant's proposed Daewoo sales facility, namely the site of a former "Mad Barry's" showroom. By letter dated 10 August 1994, DAA approved this site for the applicant's proposed Daewoo sales facility, again subject to certain conditions being agreed and met by the applicant. By letter dated 6 September 1994, Mr Damelian forwarded to Mr Stone a letter formally agreeing to the conditions in the letter of 10 August 1994.
33 By letter dated 2 September 1994, Mr Stone forwarded to Mr Damelian two copies of an unsigned Daewoo dealer agreement ("the Dealer Agreement") and a separate document setting out the terms and conditions applicable to the Dealer Agreement (the "Terms of Dealer Appointment"). Clause 2 of the Dealer Agreement provided that the Terms of Dealer Appointment was to form part of the Dealer Agreement.
34 Clause 22 of the Terms of Dealer Appointment is headed "TERMINATION". Clause 22(1) reads as follows:
"Either party may terminate the Agreement by service of prior written notice on the other provided that such notice shall specify a date for termination which allows a reasonable period of time to termination after service of the notice. The parties agree having regard to all of the circumstances that the period specified in Item Seven of the First Schedule shall be a reasonable period of time for inclusion in any notice of termination."
35 Item Seven of the First Schedule Dealer Agreement reads as follows:
"AGREED PERIOD OF NOTICE OF TERMINATION
36 Clause 3(a) and (b) of the Dealer Agreement reads as follows:
"3. (a) The Dealer acknowledges that no statements or representations other than those set out herein and in Part A of the Second Schedule hereto (if any) have been relied upon by the Dealer when entering into this Agreement.
(b) The Dealer further acknowledges that in entering into this Agreement D.A.A. relies upon the Dealer's representations and statements (if any) set out in Part B of the Second Schedule hereto."
Alleged Telephone Conversations
37 Mr Damelian gave affidavit evidence that he received the letter of 2 September 1994 enclosing the Dealer Agreement shortly after 6 September 1994. His oral evidence, which I accept in this regard, was that he could not have received it before the middle of September because he was away from his office until 16 September 1994, and that he in fact saw the letter for the first time in the third week of September on a day between 16 and 22 September 1994.
38 Mr Damelian's affidavit evidence was that when he received the Dealer Agreement he forwarded it to his solicitor, Messrs Kemp Strang & Chippindall who were engaged in technical preparatory work to "float" the applicant's holding company on the Stock Exchange. He did not by his affidavit evidence suggest that at this time he noticed that the agreement was in any way inconsistent with anything earlier said to him by Mr Hull.
39 Mr Damelian's oral evidence was that when he received the unsigned Daewoo Dealer Agreement in the third week of September 1994 he noticed two passages in the agreement that did not accord with what had been earlier said to him by Mr Hull. His said that he telephoned DAA and asked for Mr Hull, and on learning that he was unavailable, he asked for Mr Stone. His evidence was that he told Mr Stone that he was annoyed and angry and would not sign the document and that he needed to speak to Mr Hull.
40 Mr Stone's evidence was that he did not recall having a telephone conversation with Mr Damelian in the third week of September 1994 and he denied that Mr Damelian had spoken to him in the terms suggested by Mr Damelian.
41 Mr Damelian further gave evidence that about a week after his telephone conversation with Mr Stone, on a day which he believed was about 26 September 1994, he spoke on the telephone to Mr Hull. His evidence was that he said to Mr Hull that the provision in the Dealer Agreement for termination on 180 day's notice without cause was "contrary to the commitment and undertaking given by him" and that Mr Hull responded that he was disappointed that the provision was there, that he would have preferred that it wasn't there, but it was there at the advice of their lawyers. Mr Damelian further gave evidence that he said to Mr Hull that the provision of the Dealer Agreement on such a basis was contrary to the integrity that he thought that Mr Hull had, that he had been misled by Mr Hull, and that he [Mr Damelian] thought that was very unethical and unacceptable. Mr Damelian's evidence was that Mr Hull responded to the effect -
"... we will come down, don't take it this way, we're not going to start our relationship, you know, on the wrong foot ... you are a key dealer, a principal dealer, one that is a key to our success, a major one in the number one city in Australia, that he expected that, you know, we would be performing on how he [sic] was agreed and I should trust him and that he would not apply that clause in the way it was written on the contract."
Mr Damelian further gave evidence that Mr Hull said to him during this telephone conversation:
"... you should not worry any further. You have my word that I would not be exercising the convenant as it is written, then I would not be using that clause other than of course if there was any breach of covenant or with a reason ...".
42 Again Mr Damelian gave evidence under cross examination that he made notes of the commitment given to him by Mr Hull over the telephone but that he was unable to produce the notes. Again I am satisfied that his evidence in this regard was deliberately untrue and intended to strengthen the applicant's case.
43 Mr Hull denied having a telephone conversation with Mr Damelian in late September 1994, or at any time, at which words were said to the effect of Mr Damelian's evidence.
44 I am satisfied that if the telephone conversations of which Mr Damelian gave evidence took place, Messrs Stone and Hull would remember them. There is thus a clear issue of credibility for me to determine.
45 Nothing about the respective demeanours of Messrs Hull and Stone in the witness box caused me to doubt their willingness to be frank with the Court. Nor did I find either of them to be evasive or significantly lacking in consistency in their evidence. Whilst I am satisfied that in some regards each of them has an incorrect recollection of events which occurred in 1994, for the reason mentioned earlier, I am satisfied that their denials that the telephone conversations took place are not the result of faulty recollection.
46 On the other hand, there were aspects of Mr Damelian's evidence concerning the alleged telephone conversations and related topics which caused me to doubt the veracity of his evidence. First, I find his explanations for draft correspondence prepared by Messrs Kemp Strang & Chippindall not referring to his objections to the termination clause unconvincing.
47 His first explanation in this regard was that Messrs Kemp Strang & Chippindall were the solicitors for Damelian Automobile Limited and not for the applicant. I understand Mr Damelian's reference to Damelian Automobile Limited to mean Damelian Corporation Pty Limited which was intended to be "floated" on the Australian Stock Exchange as Damelian Automobile Limited. The applicant is a wholly owned subsidiary of Damelian Corporation Pty Limited. It is of significance, in my view, that it was Messrs Kemp Strang & Chippindall who successfully negotiated with DAA to have the requirement that the directors of the applicant guarantee the applicant's performance under the Dealer Agreement withdrawn. Moreover, Messrs Kemp Strang & Chippindall were involved in arrangements for the execution of the Dealer Agreement and arranged for the executed Dealer Agreement to be stamped. I am satisfied that they were retained to act for the applicant in respect of the Dealer Agreement. In any event, as Mr Damelian conceded, the assurance which he alleges that Mr Hull gave him would have had a material effect upon the information which was to be disclosed to potential investors in Damelian Automobile Limited in connection with the proposed "float" on the Australian Stock Exchange.
48 Mr Damelian's second explanation for not revealing to Messrs Kemp Strang & Chippindall the assurances which Mr Hull had given him was that the assurances were a "secret agreement" between him and Mr Hull. He explained that by this he meant that he understood that the September conversation between him and Mr Hull was to be kept confidential from the other directors of DAA and perhaps the joint venture partners in DAA. However, Mr Damelian's evidence was that Mr Hull had assured him at a meeting at Chullora that the Dealer Agreement would not provide for termination without cause. He agreed that he did not suggest that that assurance was secret. Yet by letter dated 22 September 1994, which on Mr Damelian's evidence was earlier than his alleged September telephone conversation with Mr Hull, Messrs Kemp Strang & Chippindall sent to Mr Damelian a "redrafted" letter to be sent to Daewoo on the applicant's letterhead. That draft letter referred to the Dealer Agreement and to the proposed public "float" of the applicant's holding company. The draft letter sought a release from the requirement that Mr Damelian and his brother execute a deed of guarantee and indemnity in respect of the applicant's obligations under the Dealer Agreement and sought certain other changes to the Dealer Agreement which it justified by reference to the proposed float of the applicant's holding company. Mr Damelian's initial explanation for the failure of this draft letter, which had been prepared following discussions with him, to complain about the termination clause in the Dealer Agreement was:
"Because the solicitors did not ask the question as to the level of investment with Daewoo. That was a matter for the commercial side of due diligence".
49 Subsequently he said that he did not ask Messrs Kemp Strang & Chippindall to refer in the draft letter prepared by them to the need to remove or amend the termination clause -
"Because I did not inform them. I wanted to discuss that personally with Mr Hull because I informed my solicitors as per the letter of 19 July from Daewoo that there would be no matters to discuss other, other than anything that they may appear to be relevant for the due diligence team. I informed them - see, I was appearing to be probably irresponsible as a businessman to go into the investment and the dealership without a contract. But I relied on the letter of 19 July as well as the assurances of Mr Hull and commence training [sic] August. By then they have not - they kept telling me they did not have a draft of this agreement and I had to deal with it by discussing it with Mr Hull prior to going and asking solicitors to write letters as to demanding certain things. If then they couldn't be fulfilled we could perhaps execute the document and we could not proceed with what we wanted to achieve. This was the motivation."
I find these answers unsatisfactory and evasive.
50 Mr Brien, Roberto Alfredo Damelian ("Mr Robert Damelian"), Warren Norman Smith ("Mr Smith"), Jason Athony Varone ("Mr Varone") and Mr Damelian gave evidence, admitted because of its potential relevance to Mr Damelian's credit, as to comments made by Mr Damelian in 1994 concerning the termination clause in the Dealer Agreement.
51 Mr Damelian gave evidence that a meeting of the applicant's executive management group was held on 22 September 1994. He recalled Messrs Varone and Smith being present at the meeting but not Mr Brien. He thought that Mr Robert Damelian was possibly present. He gave evidence of saying to the meeting words to the effect:-
"that I had just received a draft of a document being a dealer agreement and I was unhappy with a couple of points in there, in particular the termination clause, and I advised the members of that meeting that I would be pursing the matter with Mr Hull of Daewoo. ...I said words to the effect that I had a commitment and the word of Mr Hull that that was not to happen, but at that stage I did not have the opportunity to allow Mr Hull to respond to why that covenant was in that contract, and that's what I wanted to further advise the committee."
52 Mr Brien said in evidence in chief that some weeks after the meeting at Chullora that he attended with Mr Damelian, Mr Damelian said:-
"... that he had signed or would be signing the dealer agreement with Daewoo but was unable to do anything about the termination clause".
53 I accept Mr Brien's evidence. However, I do not find the above answer supportive of Mr Damelian's credit on the issue of the assurances allegedly given to him over the telephone by Mr Hull in late September 1994. The answer, in my view, tends rather to undermine Mr Damelian's evidence in this regard, and generally on the issue of the applicant's reliance on representations allegedly made by Mr Hull.
54 Mr Robert Damelian, a director of the applicant and Mr Damelian's brother, gave evidence that in late September 1994, Mr Damelian said words to the effect that:-
"he had concerns because the dealer agreement was not in accordance with what had been agreed in particular to do with directors' guarantees which couldn't be provided being a public company, as well as to do with the termination clause whereby Daewoo could terminate a dealer agreement at 180 days without any cause. I recall also Rick suggesting ... that Rick Hull had given assurances that that clause would not apply to a large dealer as ourselves."
55 Mr Robert Damelian also gave evidence that at or prior to the execution of the Dealer Agreement by Mr Damelian and himself on behalf of the applicant Mr Damelian:-
"... said the words that we were already trading; he had already accepted the word of the executive of Daewoo as far as those assurances were concerned ..."
56 I entertain reservations concerning Mr Robert Damelian's evidence which I do not entertain concerning Mr Brien's evidence. However, even if Mr Robert Damelian's above evidence is accepted, it provides very limited, if any, support of Mr Damelian's evidence concerning his alleged telephone conversation with Mr Hull in late September 1994. The statements of Mr Damelian of which Mr Robert Damelian gave evidence could have been based upon Mr Damelian's understanding of what Mr Hull said to him at the Chullora meeting of 23 June 1994.
57 Mr Smith, an employee of the applicant, gave evidence that at the management committee meeting of the applicant held on 22 September 1994, Mr Damelian:-
"said that he was concerned that within the agreement Daewoo had the right to terminate a dealer with 180 days' notice. He did also say that he had discussed the clause with Rick Hull and that the relevant clause would not be exercised if our dealer performances were satisfactory and that Rick Hull was a man of integrity and that we - that he choose to take him at face value."
58 Mr Varone, Deputy Managing Director of the applicant, also gave evidence concerning remarks made by Mr Damelian at the management committee meeting of 22 September 1994. Mr Varone's evidence was that:-
"The point of the conversation was that Mr Damelian said words that he was extremely disappointed with a termination clause in the Daewoo agreement and that we would have to rely on the integrity of Mr Rick Hull that this clause would not be exercised during the course of the agreement."
59 Whilst it is unlikely that either Messrs Smith or Varone has a completely accurate recall of words said by Mr Damelian on 22 September 1994, I accept that Mr Damelian said words to the general effect of their evidence at a management committee meeting held on 22 September 1994. That is, I accept that on a day earlier than Mr Damelian's alleged telephone conversation with Mr Hull, Mr Damelian was asserting that he discussed the provision in the Dealer Agreement allowing for termination on notice without cause with Mr Hull. I reject Mr Damelian's evidence of what he said at the meeting of 22 September 1994.
60 The general effect of the evidence of Messrs Smith and Varone, in my view, suggests against the truthfulness of Mr Damelian's evidence concerning his alleged telephone conversation with Mr Hull which Mr Damelian places later in time than 22 September 1994. The suggested tenor of that alleged telephone conversation is, in my view, inconsistent with Mr Damelian believing at the time of the conversation that he already held assurances from Mr Hull that the termination clause would not be exercised against the applicant.
61 I also note that Mr Damelian's oral evidence concerning his alleged telephone conversations with Messrs Hull and Stone in September 1994 was not wholly consistent with his affidavit evidence or with the case of the applicant as pleaded.
62 I am unable to be satisfied on the balance of probabilities that Mr Damelian had a telephone conversation with Mr Hull in September 1994, or thereafter, in which Mr Hull gave him an assurance that clause 22(1) of the Terms of Dealer Appointment providing for termination without cause on reasonable notice, would not be invoked against the applicant.
63 It is to be noted, however, that no witness having suggested that there was any conversation between Messrs Damelian and Hull on the topic of termination provisions of the Dealer Agreement between 23 June 1994 and 22 September 1994, the remarks apparently made by Mr Damelian on 22 September 1994 tend to confirm that Mr Damelian learned on 23 June 1994 that the Dealer Agreement would contain a provision for termination on notice without cause.
Execution of the Dealer Agreement
64 By letter dated 12 October 1994, Messrs Kemp Strang & Chippindall forwarded to Mr Stone two copies of each of the Dealer Agreement and Terms of Dealer Appointment executed under the common seal of the applicant. Part A of the second schedule to the Dealer Agreement, which provided for the identification of the representations of DAA relied upon by the applicant, remained blank. The Dealer Agreement and the Terms of Dealer Appointment were signed by Mr Hull on behalf of DAA on 12 October 1994. The documents were returned to Messrs Kemp Strang & Chippindall to allow them to arrange for them to be stamped. Stamped copies of the documents were provided to Mr Stone under cover of a letter from Messrs Kemp Strang & Chippindall dated 18 October 1994.
Termination of the Dealer Agreement
65 The relationship between the applicant and DAA after the execution of the Dealer Agreement was not an easy one. Mr Hull described it as "one of the most vexatious I have experienced in almost 30 years in the motor industry". Two areas of dispute concerned the entitlement of DAA to appoint a dealer for the Eastern Suburbs PMA, and the applicant's removal of Daewoo signage without prior consultation with DAA.
66 By letter dated 20 December 1996, DAA gave the applicant notice pursuant to clause 22(1) of the Terms of Dealer Appointment that it terminated the applicant's appointment with effect from 30 June 1997.
PLEADINGS
67 By paragraph 6 of the Further Amended Statement of Claim ("The Statement of Claim") dated 26 June 1998 the applicant pleaded:
"6. On or about 13 May, 1994 at Chullora in the course of negotiations for a dealership Mr Hull, on behalf of Daewoo, represented to Mr Damelian on behalf of the Applicant -
(a) That Daewoo, by its solicitors was in the process of drafting a form of dealership agreement which would contain provisions such that the dealership agreement was only terminable by Daewoo for breach or default by the dealer.
(b) That Daewoo would forward a form of dealership agreement to the Applicant which would contain provisions such that the dealership agreement was only terminable by Daewoo for breach or default by the dealer.
(c) That Daewoo would not terminate any dealer without just or valid reason.
PARTICULARS
The first and third representations above were express and the second representation was implied."
68 Each of the respondents denied the allegations contained in the above paragraph.
69 By paragraph 7 of the Statements of Claim the applicant pleaded:
"7. On or about 13 May, 1994 at Chullora, in reliance upon the above representations Mr Damelian, on behalf of the Applicant, agreed to accept an appointment as a Daewoo dealer upon receiving a letter of confirmation to be written by Mr David Stone, the then Dealer Development Manager for Daewoo."
70 Each of the respondents admitted that Mr Damelian, on behalf of the Applicant, agreed to accept appointment as a Daewoo dealer, but otherwise denied the allegations in paragraph 7 of the Statement of Claim.
71 By paragraphs 14-19 the applicants pleaded as follows:
"14. In and about late September, 1994 the Applicant received from Daewoo a form of dealership agreement.
15. In the form of dealership agreement received from Daewoo it was a term of the dealership that Daewoo could give reasonable notice to terminate the dealership and it was also a term of that dealership agreement that reasonable notice was agreed to be 180 days.
PARTICULARS
Clause 22(1)
Item 7 of the first schedule
16. In and about late September, 1994 Mr Stone, on behalf of Daewoo, represented by telephone to Mr Damelian on behalf of the Applicant -
(a) That the termination clause in the dealership agreement did not concern a dealer such as the Applicant.
(b) That the reason that the termination clause was contained in the agreement and could not be deleted was because of an insistence of their solicitors.
(c) That Daewoo would not apply the termination clause against the Applicant.
PARTICULARS
The first and second representations were express and third representation implied
17. In and about late September, 1994 Mr Hull, on behalf of Daewoo, represented by telephone to Mr Damelian on behalf of the Applicant -
(a) That whilst Mr Hull was in charge he had no intention of ever applying the termination clause as written and that the Applicant's only concern should be if the Applicant were in default or breach as was discussed previously between Mr Hull and Mr Damelian.
(b) That Daewoo will not terminate the dealership agreement without cause.
(c) That the Applicant should accept and act upon Mr Hull's word.
(d) That the reason that the termination clause was contained in the agreement and could not be deleted was because of an insistence of the solicitors.
18. On 12 October, 1994 Mr Damelian, on behalf of the Applicant, executed a dealership agreement for the inner west area.
19. The Applicant executed the dealership agreement relying upon the representations made to it in paragraphs 6, 16 and 17 above.
72 The respondents admitted that in or about September 1994 the first respondent delivered to the applicant a form of dealer agreement and that Mr Damelian, on behalf of the applicant executed a dealer agreement for the inner west area. However, they denied that Messrs Stone and Hull respectively made the representations set out in paragraphs 16 and 17 of the Statement of Claim.
CONCLUSIONS
73 As is mentioned above, I am satisfied that Mr Damelian attended two meetings with DAA executives at Chullora and that discussion concerning the termination provision to be included in the dealer agreement occurred on 23 June 1994 and not on 13 May 1994. In the circumstances of this case I do not consider the difference between these two dates to be a significant matter.
74 I am satisfied that on 23 June 1994 Mr Damelian was told by Mr Hull or Mr Stone, or perhaps both, that the solicitors for DAA were in the process of drafting a form of dealership agreement. However, I am not satisfied that Mr Damelian was told at this meeting or at any time, that the agreement "would contain provisions such that the dealership agreement was only terminable by Daewoo for breach of default by the dealer" (see pars 6(a) and (b) of the Statement of Claim).
75 I refer to my findings set out above as to what was said on 23 June 1994 concerning the termination clause to be included in the dealer agreement. In particular I refer to my findings that Mr Damelian was told on that day that the dealer agreement would provide for termination on notice without cause, but that Mr Hull also said words to the effect that "because of the strength of the dealer network they believed they'd be signing up, that it was not their intention to cancel any dealer unless there was a valid reason in respect to [sic] bankruptcy or dishonesty or something like that". The distinction between what was to be included in the dealer agreement and DAA's intention as to how it would administer the dealer agreements, based on a belief concerning the dealer network it would sign up, is, in my view, an important one.
76 It is to be remembered that Mr Damelian is an experienced business person in the car industry who as at 1994 had negotiated on behalf of the applicant, or related companies, a number of dealer agreements. He had previously experienced difficulties with a car manufacturer concerning the termination of a dealer agreement. He was alert to the wisdom of inquiring at an early stage about the rights of termination which the dealer agreement would give DAA. I find that his response to Mr Hull's statement about DAA's intention with respect to the use of its powers of termination indicates that Mr Damelian recognised the lack of precision inherent in Mr Hull's statement, and that he was not satisfied to rely on Mr Hull's statement as to DAA's intention but wished to learn the precise terms of the termination clause to be included in the dealer agreement.
77 In the event, however, it appears that Mr Damelian signed the Daewoo Dealer Application dated 30 June 1994 without learning of the precise terms of the termination clause to be included in the dealer agreement, and subsequently accepted the appointment of the applicant as a Daewoo dealer, subject to certain conditions, including the signing of a Dealer Agreement, without further information concerning the terms of the dealer agreement. It is not possible for me to determine why he did this.
78 I find that Mr Hull did not represent to Mr Damelian on 23 June 1994, or at any time, that "Daewoo would not terminate any dealer without just or valid reason" (para 6(c) of the Statement of Claim) although, as is mentioned above, I am satisfied that Mr Hull did say to Mr Damelian on 23 June 1994 words to the effect that "because of the strength of the dealer network they believed they'd be signing up" that it was not DAA's "intention to cancel any dealer unless there was valid reason in respect to [sic] bankruptcy or dishonesty or something like that". I am satisfied that that statement, made by the managing director of DAA, accurately reflected DAA's intention at the time that the statement was made.
79 However, I am satisfied that Mr Damelian did not place reliance on Mr Hull's statement. As is mentioned above, I accept the evidence of Mr Brien that in response to Mr Hull's statement concerning the termination clause, Mr Damelian said words to the effect:-
"that he was concerned that he didn't know exactly what it'd be and he would like to define that at a point in time very quickly".
80 The fact that Part A of Schedule Two of the Dealer Agreement makes no reference to Mr Hull's statement, despite the fact, as I find, that the applicant received legal advice with respect to the terms of the Dealer Agreement, tends to confirm this absence of reliance (cf Leda Holdings Pty Limited v Oraka Pty Limited (1997) ATPR 41-601 at 40,516).
81 Moreover, between business persons of the respective experiences of Messrs Damelian and Hull, I find that the statement made by Mr Hull as to DAA's intentions, taken in the context in which it was made, was not the sort of statement likely to have an inducing effect on Mr Damelian's mind (Leda Holdings, above, at 40,515).
82 Of course, Mr Damelian did not suggest that he was induced to do anything by a statement made by Mr Hull as to DAA's intentions with respect to the cancellation of dealer agreements. His evidence was that he placed reliance on a statement made by Mr Hull that the Dealer Agreement would not allow for termination on notice without cause. As is mentioned above, I am satisfied that no such statement was made by Mr Hull.
83 I turn to the allegations contained in paragraphs 16 and 17 of the Statement of Claim. No evidence was lead in support of the allegation contained in paragraph 16(a) and (c) of the Statement of Claim. Indeed, Mr Damelian's oral evidence was that Mr Stone said to him on the telephone words to the effect that he was unable to do anything about the convenants, and that he [Mr Damelian] immediately said that he needed to speak to Mr Hull. However, I am satisfied that Mr Damelian's evidence concerning his alleged telephone conversation with Mr Stone in September 1994 is untrue. I am satisfied that no representations in terms of subparagraphs (a), (b) or (c) of paragraph 16 of the Statement of Claim were made to Mr Damelian by Mr Stone in or about late September 1994 or at any time.
84 For the reasons given above, I reject the evidence of Mr Damelian concerning his alleged telephone conversation with Mr Hull in late September 1994. I am satisfied that Mr Hull did not make the representations set out in subparagraphs (a), (b), (c) or (d) of paragraph 17 of the Statement of Claim to Mr Damelian in or about late September 1994 or at any time.
85 The orders sought by the applicant in its application are as follows:
"1. A Declaration the First and Second Respondents have engaged in conduct which was misleading or deceptive or likely to mislead or deceive.
2. A Declaration the First and Second Respondents have made misleading representations in respect of future matters.
3. A Declaration the Second Respondent had aided, abetted, counselled or procured the conduct of the First Respondent as found in Orders 1 and 2 herein.
4. A Declaration the Second Respondent has been knowingly concerned in or party to the conduct of the First Respondent as found in Orders 1 and 2 herein.
5. Damages.
6. Such other Orders pursuant to Trade Practices Act s 87 and Fair Trading Act s 72 as the Court thinks fit."
86 For the reasons already given I am satisfied that the applicant has failed to demonstrate an entitlement to any such orders.
87 The application will be dismissed.
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I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable
Justice Branson. |
Associate:
Dated: 12 February 1999
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Counsel for the Applicant: | Mr M. Neil QC with Mr L. Ellison |
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Solicitor for the Applicant: | Bowen & Gerathy |
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Counsel for the First Respondent: | Mr G.E. Underwood |
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Solicitor for the First Respondent: | Mallesons Stephen Jaques |
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Counsel for the Second Respondent | Mr P.M. Jacobson QC with Mr A.I. Tonking |
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Solicitor for the Second Respondent | Letherbarrow & Associates |
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Date of Hearing: | 22, 23, 24 June; 28, 29 September; 1, 2 October 1998 |
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Date of Judgment: | 12 February 1999 |
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/1999/92.html